California Supreme Court ruling could have monumental impact on workers in gig economy
California’s top court issued a decision on April 30 making it harder for companies to classify workers as independent contractors rather than employees.
The unanimous ruling replaced the previous test for setting employment status, which largely considered the control a company had over a worker, like where and when work was done.
In recent years, the gig economy has grown at an explosive rate. App-driven services such as Uber have boomed using a business model that relies on independent contractors, signing up thousands of workers who are not subject to government protections on minimum wage, overtime and rest breaks.
Employers have profited by not having to pay social security taxes, payroll taxes, workers’ compensation and unemployment insurance to its independent contractors. In the wake of this new ruling, employers will have a more difficult time profiting in this manner. Strong Advocates Executive Director, Betsy Havens, says, “This case is an important step forward toward protecting workers’ rights.”
The new test cited in the ruling determines workers are employees if they provide services “within the usual course of the business” of the employer.
For example, when a bakery hires a cake decorator to design cakes on a regular basis, the decorator should be considered an employee. When a retailer hires a plumber to fix a leak in its store, the plumber should be considered an independent contractor.
The case that prompted the decision involved a class-action lawsuit by delivery drivers against Dynamex Operations West Inc., a package and document delivery company. The drivers had been considered employees until 2004 when Dynamex changed their worker status to independent contractors; a move the drivers argued was a misclassification.